Factor Saving Innovations and Factor Income Shares

Hernando Zuleta

Review of Economic Dynamics, 2008, vol. 11, issue 4, 836-851

Abstract: We present an endogenous growth model where innovations are factor saving. Technologies can be changed paying a cost and technological change takes place only if the benefits are larger than the costs. Since the gains derived from factor saving innovations depend on factor abundance, biased innovations respond to changes in factors' supply. Therefore, as the economy becomes more capital abundant agents try to use capital more intensively. Consequently, (a) the elasticity of output with respect to reproducible factors depends on the capital abundance of the economy and (b) the income share of reproducible factors increases as the output grows. Another insight of the model is that in some economies the production function converges to an AK in the long run, while in others long-run growth is zero. (Copyright: Elsevier)

Keywords: Endogenous growth; Capital using and labor saving innovations; Factor income shares (search for similar items in EconPapers)
JEL-codes: D33 O11 O31 O33 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

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Working Paper: Factor saving innovations and factor income shares (2006)
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DOI: 10.1016/j.red.2008.02.002

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